2013.06.01. INTERNAL AFFAIRS 02.02.2004 - Fidesz leading the polls at Tárki and Szonda 04.02.

2004 - Agriculture hardly hit after cost-cutting 06.02.2004 - Malicious politics, influenced press FOREIGN AFFAIRS 02.02.2004 - American visa issuance is examined 06.02.2004 - British indulgence, Swedish rigidity? - Is Slovakia going to be the promise land as of May? MACROECONOMY 02.02.2004 - In the running for capital 03.02.2004 - IMF taking a patient approach 04.02.2004 - Experts urging for austerity measures to a further HUF 75 billion - Industrial producer prices falling in December 05.02.2004 - General government deficit at HUF 219 billion in January 06.02.2004 - Analysts projecting inflation of 6.1-6.2 percent by January - Industrial output increasing at a faster than expected pace BANK 02.02.2004 -Economist criticising Hungary 04.02.2004 -Capital increase at K&H Equities - MFB credit borrowing of quarter billion euros HEAVY INDUSTRY 04.02.2004 - Nabi appointing András Bodor CHEMICAL INDUSTRY 04.02.2004 - Losses of one-and-a-half billion at Pannonplast ENERGY INDUSTRY 05.02.2004 - Biogas-run power plant in Pálhalma TELECOMMUNICATION 06.02.2004 - New financial executive at eTel INFORMATION TECHNOLOGY 02.02.2004 - PanTel parts with its Euroweb package 06.02.2004 - The Elender-Euroweb transaction can be signed by the end of the month FOOD INDUSTRY 02.02.2004 - Bankruptcy or liquidation at Parmalat 03.02.2004 - Cigarettes more expensive soon - Kométa forced to downsize its production - New managing at BAT Hungary 04.02.2004 - Can Hungarian meat go to the USA as of April again? - Kaposvári Hús changing hands 06.02.2004 - Hungarian mineral water awarded Oscar TRADE, FAIRS 02.02.2004 - Is Wal-Mart heading to Hungary? 03.02.2004 - C&A store in Westend shopping centre - Oceanic enters into Hungarian market - Plaza constructions in bulk manufacture 04.02.2004 - Do-it-yourself store chains expands - Own brands in expansion 06.02.2004 - Mail order companies are increasingly popular TRAFFIC, TRANSPORT 02.02.2004 -M5 to be bought from loans - British Airways to start a new flight 04.02.2004 - 300,000 SkyEurope passengers starting from Budapest this year - M5 case is not finalised yet 05.02.2004 -M5. No money, no sticker - Foreigners going out of the motorway bidding - Malév is on time 06.02.2004 -Minority ownership is the worst solution INVESTMENT, DEVELOPMENT 02.02.2004 - Rockwool to start an investment of several billion - Plazas in Hungary changing hands 03.02.2004 -Raiffeisen getting Rózsakert - Harbor Park awarded 05.02.2004 -ZF Hungária to develop its Eger plant - Euro-Vegas can be built - Kõolajvezetéképítõ getting an order from Iraq - Market cleaning in the apartment sector

2

2013.06.01. 06.02.2004 - Rover to build a motorway in Slovakia - Giant housing project in Transdanubia TAX, SOCIAL INSURANCE 03.02.2004 - APEH focusing on discounts WORLD ECONOMY 06.02.2004 - Budapest neck-to-neck with Milan MEDIA 03.02.2004 - Newcomers in the advertisement pie this year

3

2013.06.01.

4

INTERNAL AFFAIRS - 02.02.2004 Fidesz leading the polls at Tárki and Szonda
50 percent of those for sure turning up at European Parliament elections would vote for opposition Fidesz - Hungarian Civic Alliance, whilst 35 percent would support senior governing party Hungarian Socialist Party MSZP, with junior coalition partner Alliance of Free Democrats SZDSZ getting 6 percent and Hungarian Democratic Forum 4 percent, respectively – recent figures form pollsters Századvég and Tárki reveal. According to these surveys, Fidesz has an advantage of 18 percent when it comes to those with a party choice and 17 percent in terms of those with a certain party support over the socialists. Compared to data from the last month, differences are shocking: Fidesz could gain 9 percent in both lists, whilst the popularity of MSZP has declined by 9 and 8 percent, respectively. Data from another thinktank Szonda Ipsos also show increasing figures for Fidesz: 32 percent of those interviewed would vote for the opposition party, whilst only 24 percent would for the socialists, should elections be held last Sunday. However, these figures do not show so drastic movements on earlier figures: Szonda says that support for the two large parties has been within a narrow band since last September, when Fidesz has taken over the lead from MSZP. (Nszab, 31 Jan, p 4, MH, 31 Jan, p 4, NSZ, 31 Jan, p 3, MN, 31 Jan, p 1 and 3)

INTERNAL AFFAIRS - 04.02.2004 Agriculture hardly hit after cost-cutting
The agriculture can be hardest hit after budget cuts executed: since the changing of the regime, it has been unprecedented that the sector gets as low sums of money as now. The Ministry has earlier spoken about HUF 290 billion in free-to-use-sources, however, the amount earmarked for the new national development program has gone down to HUF 50 billion and is pushed further down by budget-related austerity measures by a further HUF 20-30 billion. As a comparison, the government has earmarked HUF 220 billion for the same goal last year. The dairy sector has been given HUF 13 billion last year, whilst this year only a total of HUF 3 billion will be transferred there, whilst the sum for the poultry sector has come down form HUF 11 billion to HUF 4 billion. Making the agricultural crisis even deeper is the fact that sources for completing Union grants is missing, thus money available through applications does not find its way to farmers – experts state, telling that taking money away form the sector is a political suicide, which can lead to demonstrations comparable to the so-called taxi blockade. (Nszab, p 11)

INTERNAL AFFAIRS - 06.02.2004 Malicious politics, influenced press
Relentlessness is a virtue, compromise is bankruptcy and approach is traitorousness – writes Neue Zürcher Zeitung about Hungary. According to the Swiss paper nowhere else in Eastern Europe are various groups of the society attacked with such desperate hate as in Hungary. Every problem immediately runs into politics even where independent competence would be required. And this hinders the establishment of the civic society. According to the article in Hungary the concept of independent media is Chinese. Important papers are influenced by parties and the same applies to electronic media as well. (MH p3)

FOREIGN AFFAIRS - 02.02.2004 American visa issuance is examined
An American-Hungarian workteam is established to examine the practice of American visa issuance – stated Mónika Lamperth, Minister of Interior. The Minister of Interior reported this after she returned from her official trip to the United States. At her meeting with David Smith, state under-secretary leading the office of Consulate Cases Mónika Lamperth urged the introduction of mutual visa release and ensured him that Hungary did not plan countersteps due to the strictening of American entrance rules. (Nszab. p5, MH p5)

FOREIGN AFFAIRS, EUROPEAN UNION - 06.02.2004 British indulgence, Swedish rigidity?
As of May there is an opportunity for employment in the United Kingdom for people arriving from new EU member states, among them Hungary – confirmed John Nichols, British Ambassador in Budapest. He said that London did not count on mass workforce inflow. Several details are not clear yet about the issue, but the diplomat considered Times‘ information, according to which employees arriving from new member states can only receive social rights in the island after two years, guessing. Sweden, however, intends to withdraw from its current liberal politics. This would mean that until a determined period of time licence would be needed for employment. (Nszab. p2)

2013.06.01.

5

Is Slovakia going to be the promise land as of May?
Slovakia can become attractive for Hungarian investors as of May, because taxes and fees are lower there than in Hungary and after the accession the flow of capital and workforce will become free. According to experts for „easily moving“ companies it will surely be worthwhile to relocate their seat, and dozens of Hungarian companies are expected to decide on moving, but according to news wealthy private persons are already looking for apartments in Bratislava, since personal income tax is half over there than in Hungary. Otherwise, real estate prices in Bratislava are already approaching those of Budapest, but in Dunaszerdahely, for example, apartments are still available for half thereof. (MH p9)

MACROECONOMY - 02.02.2004 In the running for capital
Experts asked by economic daily Világgazdaság are of the opinion that the Hungarian economy has not lost in the running for the capital, but rather stresses have been shifted. Miklós Hegedûs, General Manager of economic research institute GKI said that in sectors that necessitate high skills, Hungary still has chances to lure capital into the country, however, he added that he have to give up our privileged places of the nineties. Péter Spányik, Deputy General Manager of ITD Hungary, while admitting that Slovakia is offering better opportunities for foreign investors in many respects, adds that Hungary does not have to be afraid that all regional investment would now be directed to our northern neighbour. ITDH is urging the relocation of companies involved in service and logistics centres and dealing with research and development to Hungary. (VG, p 1 and 5)

MACROECONOMY - 03.02.2004 IMF taking a patient approach
The International Monetary Fund (IMF) has given a positive, better-than-expected assessment of Hungary's economic trends. Experts are of the opinion that competitiveness has been on the increase recently and the structure of economic expansion is expected to be better on the back of investment and export dynamics. At the same time, IMF is of the opinion that large general government deficit and current account deficit are undermining Hungary’s outlook and the country is hit by a loss of creditability of its economic policy. Public savings are set to increase moderately and investments of the private sector are not going to be enough to finance increased private investments, thus current account deficit can get lower only through pushing down the budget deficit. IMF welcomes the idea of the HUF 120 billion cost cutting program, but is afraid that GDP-proportionate deficit can still exceed the projected figure by 0.7 percent on the back of lower income projections. The report writes that wages should be considered frozen at public institutions leading to savings to the tune of 0.5 percent of the GDP. The monetary policy has not large room to manoeuvre, so decreasing interest rates can be possible only later, after creditability is restored. The Finance Ministry has positive opinion on the IMF report. The ministry said that pushing down deficit in the middle term is indispensable and can be executed through supervising the expenditure structure and reform of the welfare system. (VG, p 4, NSZ, p 1 and 5)

MACROECONOMY - 04.02.2004 Experts urging for austerity measures to a further HUF 75 billion
Analysts interviewed by Reuters are of the opinion that besides the HUF 120 billion austerity program, a further HUF75 billion in savings would be necessary to meet the government’s modified deficit goal. Experts added that ministries will do everything in their power not to be forced to curb their expenditures, so there is real danger that there will be a sabotage against the austerity measures. The market expects from the government that on the cabinet session of 25 February decisions will be made not only on the details of the austerity program, but also concrete macroeconomic indicator projections will be announced. Market players, especially foreign analysts and investors are pessimistic and are speculating for a weakening forint. The central bank’s hand is tied: it can not increase interest rates without the danger of overshooting financing costs, whilst the weak forint is putting inflation goals at risk. Experts are of the opinion that it would help a lot to restore lost confidence if the government would give up its ambitious plans of joining he eurozone in 2008 and would give up its aggressive campaigning for entering the ERM II system, called the hall of the eurozone. They argue that through a too fast entrance to the ERM II system, the economy would be exposed to continuous speculative attacks. On a similar note, traders added that the interbank market does not count on stronger forint, and large foreign banks also forecast weaker Hungarian currency to come. Deutsche Bank’s analysis, for example, is projecting a HUF/EUR rate of 270 within a month. (MH, p 13, NG, p 1 and 3)

2013.06.01.

6

Industrial producer prices falling in December
Industrial producers' prices dropped by 0.1 percent month-on-month in December 2003, meaning that producers' prices rose by 2.4 percent year-on-year in 2003- Central Statistical Office Központi Statisztikai Hivatal (KSH) announced. Hungary's domestic prices went up by 5.0 percent year-on-year and export prices in forints increased by 0.3 percent year-on-year in 2003.Prices in all sectors were up with increases ranging from 0.9 percent to 18.5 percent. (NG, p 3)

MACROECONOMY - 05.02.2004 General government deficit at HUF 219 billion in January
Hungary's general government deficit, excluding local governments and privatisation revenues, was HUF 219 billion in January according to preliminary cash-flow-based figures announced by the Finance Ministry on Wednesday. The figure corresponds to 23 percent of the HUF 920.3 billion annual deficit target and was lower than the Finance Ministry’s earlier projection. The Finance Ministry has earlier announced that the January deficit can exceed the usual figures on the back of motorway projects-related payments, an instalment due on the Gripen lease contract and the sums due in agricultural support. These one-off payments amounted to HUF 90 billion together. Excluding one-off items from last year’s and this year’s calculations, budget expenditures were 9.1 percent up on the basis figure, whilst the Finance Ministry added that counting with extraordinary expenditures, costs have increased by 20.7 percent. Worsening January figures was the fact that social security income was coming at a lower rate than last year. Experts are of the opinion that in spite of the better than expected January data, there are no signs of a recovery for the time being. The GDP-proportionate deficit target was raised from 3.8 percent to 4.6 percent, however, analysts are of the opinion that spending cuts of HUF 155 billion as part of the Draskovics program (named after the Finance Minister designate) will not be enough to meet this plan and further correction should be made in the first half of the year. (NG, p 1 and 3, MH; p 1 and 9, VG, p 5)

MACROECONOMY - 06.02.2004 Analysts projecting inflation of 6.1-6.2 percent by January
Economic analysts are of the opinion that the Monetary Council is not going to modify benchmark interest rates in its Monday session, currently at 12.5 percent. However, should it decide to carry out changes, then the rate can go only larger. Whilst the decision is made, it should be taken into consideration that investors could turn away not only from Hungary, but also from the whole region after losing their faith. On the back of the uncertain situation, forint, together with Polish zloty, has been weakening: the HUF/EUR rate stood at 264-265 at the beginning of today’s trading, whilst it has been around 267 in the afternoon. The weakening can be put down to the decline of the Polish currency, since in Hungary no major news was announced. Analysts forecast inflation rate of 6.1-6.2 percent for January. The central bank hopes that this will not be built into expectations, so the inflation rate can go down to around 4 percent by the end of 2005. (NG, p 3)

Industrial output increasing at a faster than expected pace
Unadjusted industrial output was up by 11.8 percent year-on-year in Hungary, according to preliminary data released by the Central Statistical Office. According to seasonally and working-day adjusted figures, volumes rose by 7.5 percent from December 2002, thus the industrial output rose by 6.4 percent year-on-year in 2003. Experts are of the opinion that larger than expected figures are a proof that the industrial decline or stagnation is a thing of the past and a sustainable expansion process has started after bottoming out early summer 2003. (NG, p 3)

BANK - 02.02.2004 Economist criticising Hungary
The Polish central bank has pursued a better financial policy than its Hungarian peer in the two countries similarly difficult macroeconomic situation – Economist writes. The analyses writes that the fact that interest rate are 7 percent larger in Hungary than in Poland can be put down to the fact that Hungarian financial policy has been poorly communicated by the National Bank. (MH, 31 Jan-1 Feb, p 1 and 11, MN, 31 Jan, p 11)

2013.06.01.

7

BANK - 04.02.2004 Capital increase at K&H Equities
Commercial and Credit Bank K&H Bank has acquired a total ownership in brokerage arm K&H Equities. Economic Competition Office GVH has approved the capital raise by the bank at the brokerage company by HUF 666,7 million as of 2 February, whilst it also has increased its equity capital by HUF 8.6 billion. In the meantime, the partial suspension of K&H Equities is still in effect and payment for the client has not started yet. According to information from the Hungarian Radio, the company has already worked out the compensation plan, prescribed by Hungarian financial market watchdog PSZÁF. All investors whose compensation claims were tuned down will be notified in a letter. The radio has learnt that there are ones that have to pay. However, with the ones the brokerage company could agree in speech, they will write it down in an agreement and then the payment process may start. (VG, p 15, NG, p 11)

MFB credit borrowing of quarter billion euros
The Hungarian Development Bank is preparing to borrow a syndicated credit of 200-250 million euros in order to finance its currently running programmes. The transaction, the start of which awaits the approval of the Finance Minister, can be closed by the end of March. This year MFB plans placements of HUF 220-230 billion, in which it would like to involve sources of 350-400 million euros. (MH p11)

HEAVY INDUSTRY - 04.02.2004 Nabi appointing András Bodor
Hungarian bus maker NABI Rt, majority owned by the U.S.-Hungarian venture capital fund First Hungary Fund Ltd, has appointed András Bodor the company's corporate affairs director as of February 1, 2004. He is to succeed Ákos Érsek, who left this position at then end of last year. Bodor has been managing companies, which are members of the First Hungary Fund that holds 54 percent of the busmaker in the past years, among them Coloryte Kft. and Vihar Kft. and has been managing the stock exchange portfolio as an investment director. (VG, p 13)

CHEMICAL INDUSTRY - 04.02.2004 Losses of one-and-a-half billion at Pannonplast
One week before its flash report, Pannonplast reported profit warning and the change of the general manager. According to the company last year’s losses can reach HUF one-and-a-half billion, compared to the HUF several hundreds of millions expected by the market and included in the company’s forecast that was formulated at the end of October. The board dismissed CEO János Illésy as of yesterday and his place will be taken over by Csaba Zoltán. Illéssy resigned from his board membership as well and, according to the news of Világgazdaság, the members of the supervisory board also submitted their resignations. After the announcement the stock exchange trading of the company’s papers were suspended for two-and-a-half hours and the price finally closed HUF 50 below the previous day’s level, at HUF 1330. Csaba Zoltán said: in the current situation of he company they need a more dynamic approach; profitable business can be achieved again with a new strategy, higher cost efficiency and a reorganised organisation. The board will close its strategy and decide on additional steps within weeks. Right now the settlement of the financing situation is the most important at the company. The repayment of the HUF 3 billion club credit that will become due on February 9th, but immediate repayment would presumably put Pannonplast into a difficult situation. On February 17th the company will announce the subsidiaries it will part with after reorganising the holding structure. (VG p13, NG p11, 12)

ENERGY INDUSTRY - 05.02.2004 Biogas-run power plant in Pálhalma
State owned Agrospeciál Kft., mainly dealing with agricultural activities, would like to build Europe’s largest biogas power plant in Pálhalma with a capacity of 11 GWh electric energy annually. The Dunaújváros-based company plans to earmark HUF 1.2-1.3 billion for the investment, made possible by the fact that the company has taken part in Austria’s carbon purchase program. Under the Kyoto agreement, Hungary’s carbon dioxide emission lags behind the limit, whilst Austria is exceeding this figure, thus it is forced to buy a quota. Agrospeciál would sell its annual 30,000-40,000 emission units per EUR 8-12 per ton between 2008 and 2012. The Austrian government, that is, Austria, under an agreement with the concerned ministry is going to pay for the purchased quota before the investment takes shape and the Austrian company that designs and implements the power plant is to give capital to the development. It is organic material produced in the company’s plants that will be processed in the plant. Produced gases would be burnt and the electric energy gained would be given to the local electricity distributor and the heat transferred to heat places where animals are kept. (NG, 5 Feb, p 5, Dunaújvárosi Hírlap, 30 Jan, p 3)

2013.06.01.

8

TELECOMMUNICATION - 06.02.2004 New financial executive at eTel
Attila Dévai became the new financial director of eTel Hungary. The professional has filled a leading position at Média Markt, Danube Knitwear Limited, Varga Stúdió Film Kft and Vivendi Telecom before. (VG p13)

INFORMATION TECHNOLOGY - 02.02.2004 PanTel parts with its Euroweb package
The American Euroweb International buys 51 percent of Euroweb Rt. from PanTel. The investor will thereby become the one hundred percent owner of the Internet service provider. The purchasing price is 1.65 million euros, equal to nearly HUF 440 million. Both PanTel and Euroweb International are in the majority ownership of the Dutch KPN. (MH Jan. 31th-Febr. 1st p12, MN Jan. 31st p12)

INFORMATION TECHNOLOGY - 06.02.2004 The Elender-Euroweb transaction can be signed by the end of the month
Only a letter of intent arose about the sale of Elender Rt. to Euroweb. János Kóka, leader of the former company, does not exclude other potential buyers from the competition for the company for the time being. Concerned parties will discuss finalisation of the Euroweb-Elender transaction, thus the price as well, in the following weeks; in Kóka‘s hopes the contract can be signed at the end of the month already. Csaba Törõ, general manager of Euroweb International, stated: by the merger of the two companies an extremely strong Internet service provider can be born. In his opinion two months are necessary for the licences of the board of directors and the competition office. (VG p13)

FOOD INDUSTRY - 02.02.2004 Bankruptcy or liquidation at Parmalat
Hungarian milk suppliers who have not been paid for more than 60 days by the crisis-torn Parmalat dairy empire started liquidation procedures Friday against its local subsidiary Parmalat Hungária Rt. Producers have been conducting talks with the company for two weeks, unsuccessfully. Parmalat has convened an extraordinary general meeting for Saturday, where a decision on starting bankruptcy proceedings has been made. General Manager Cristiano Villani said that the measure was aimed at keeping up the company‘s operations and its assets plus that the management would have time to work out a plan ensuring the plan for future operations. Villnia termed liquidation as the „worst possible solution“, which could mean the end for Parmalat, he added. The extraordinary general meeting is to go no on 1 March. The producer’s consortium that asked for the liquidation procedure to be started has given the dairy producer till 3 February to come up with a concrete offer. (NSZ, 31 Jan, p 5, 2 Feb, p 5, Nszab, 31 Jan, p 17, 2 Feb, p 13, MH, 31 Jan-1Feb p 11, 2 Feb, p 11, MN, 31 Jan, p 11)

FOOD INDUSTRY - 03.02.2004 Cigarettes more expensive soon
On the back of the excise tax hike of 23 percent, effective from January, will make some prestigious brand’s prices. Sopiane, the market leader in popularity, will see its price jumping by nearly 15 percent to HUF 415. Pall Mall and Multifilter are set to cost HUF 470, compared to the current HUF 415, with Kent reaching the price of HUF 560 from HUF 505. British American Tobacco, the distributor of the Sopiane brand, has already sent the new price list to its regional representatives, whilst the other significant player of the market, Philip Morris Magyarország Kft. is still waiting with publishing new prices. More expensive cigarettes will hit the shops expectedly next week. According to calculations, the tax content of a box of cigarettes at HUF 415 will reach HUF 224.45, however, another price hike can take place already this year, increasing the common charge of the product to 51-52 percent. Under European Union regulations, the excise tax contend of a box of cigarette has to reach 57 percent, or EUR 64 per 1,000 pieces, which translates into EUR 1.28 per box. Taking into account current prices, it stands at HUF 335 per box, so the HUF 224.25 tax content of favourite brands still lags behind the Union’s condition. The Finance Ministry has counted on a 10 percent revenue decrease when drafting the 2004 budget, whilst manufacturers do not rule out an even 20 percent decline on the back of the price hike. There is no still sign of smaller interest for cigarettes in the largest hipermarkets, but there are salesmen already telling about 25-30 percent lower sales figures, probably losing out to the black market and consumers’ purchases brought forward for December. According to the National Association of Tobacco Traders (Dohányboltosok Országos Egyesülete), the tax hike will only result in the decrease of legal consumption, since the real number of smokers will not drop, but rather shift to the favour of the black market. (NG, p 1 and 4)

2013.06.01.

9

Kométa forced to downsize its production
The Ministry of Agriculture and Rural Development, based on the checking of an authority has suspended the export license of Kométa ’99 Kft from 30 January, since the Ministry is of the opinion that the Kaposvár-based meat factory does not meet Union conditions. Although Kométa has applied against the decision, it can happen that Hungary’s third largest slaughterhouse, employing more than 900 currently and processing 40,000 pork a year, while posting HUF 18.5 billion in sales revenues and exporting 40 percent of its products, can process only 5,000 pork a year in the future and only for the domestic market. Giacomo Pedranzíni, General Manager of Kométa, who has sent an open letter to the Minister of Agriculture and Rural Development, has termed the unexpected visit of 28 January as discriminative and malicious and has voiced his concerns that two members of the committee were coming from competitive meat processing companies of Pápa and Kapuvár. The letter calls on the Minister of Agriculture to have another examination and suspend the decision till that time. Mayor of Kaposvár, Károly Szita, annoying for one of the town’s largest taxpayers, has asked Imre Németh to initiate an independent check at the company. (Nszab, p 13, NG, p 5)

New managing at BAT Hungary
As of January Pauline Stam is the new manager of British American Tobacco’s Hungarian subsidiary. The Dutch business woman has been controlling the company’s marketing activity up to the present time. (VG p10)

FOOD INDUSTRY - 04.02.2004 Can Hungarian meat go to the USA as of April again?
Hungarian meat export to the United States can be restarted in April already, since instead of the usual supervision lasting for one-and-a-half years, the American authorities apply an accelerated procedure – announced the political under-secretary of the Ministry of Agriculture and Rural Development, who negotiates in Washington. Tibor Szanyi also said that in the future excellently working plants cannot get into a disadvantageous situation due to firms that do not comply with technological prescriptions, therefore less companies can be included on the list of enterprises exporting to the USA and undergoing regular annual American checks. (Nszab. p13)

Kaposvári Hús changing hands
Current lessee Debreceni Hús Rt. has entered into an option agreement to buy Kaposvári Húsipari Rt. and should it pay the purchase price till August, it can have the plant dealing with slaughtering and chopping animals, giving job to 408 people. Gyula Román, General Manager of the Debrecen-based factory is of the opinion that business outlook is quite positive for the Kaposvár plant, despite the fact that it has not posted profits since September. (Nszab, p 13)

FOOD INDUSTRY - 06.02.2004 Hungarian mineral water awarded Oscar
A product of east Hungary's Szentkirályi Ásványvíz Kft. proved to be the best in the non-carbonated category at a mineral waters exhibition in Paris this year. The company, founded with equity capital of HUF 3 million last year belongs to Vitapress Kft, owned by the family and boasting HUF 3.5 billion in sales revenues in 2003 and having a profit of HUF 140 million in the same period. Vitapress, besides bottling mineral water, is dealing with manufacturing carbonated drinks, fruit juice, syrup and artificial soups. Up to now, it has had losses from the mineral water arm. Szentkirályi Ásványvíz Kft. is employing 60 people and plans to market 15 million bottles of mineral water this year. The company plans to expand its capacitates, but does not have the necessary sources in place. It has once been given state subsidy, a HUF 30 million one from the Széchenyi plan. (Nszab, p 13, VG, p 14)

TRADE, FAIRS - 02.02.2004 Is Wal-Mart heading to Hungary?
After the EU accession competition can further sharpen in the retail market. The German Lidl discount chain plans to open 25-30 stores in Hungary by the end of 2005. The cosmetics network Schlecker, the Swedish Hennes and Mauritz clothing network are also heading to the Hungarian market and the American Wal-Mart considers appearing here too. The latter giant company founded a subsidiary under the name of Global Sourcing Hungary Szolgáltató Kft. last May. Guessing has been going on since than about which chain the investor would buy, since the American firm presumably will not start greensites. According to experts the company is thinking in regional expansion, thus regional acquisition can be counted on, for example the obtainment of Rewe that operates Penny Market or of Metro. But other observers think that Wal-Mart is primarily interested in the Russian market. (MH p12)

2013.06.01.

10

TRADE, FAIRS - 03.02.2004 C&A store in Westend shopping centre
C&A will open its third store in Hungary in the Westend City Center, in the place of the sometimes Giacomelli sport store. The company opened up units in Árkád Bevásálóközpont (Árkád Shopping Centre) an in Pólus Center uo to now. The German fashion trader company shows interest for the business space former leased by Giacomelli in Campona shopping centre, however concerning this issue there is decision made yet. The stores are operated by C&A Mode Kft. that is managed by the Austrian subsidiary of the German parent company. (NG p4)

Oceanic enters into Hungarian market
Polish Oceanic company will introduce its products to the Hungarian, Greek, Ukraine and Bulgarian markets. The manufacturer and trader of cosmetic products spends 2.6 million dollars on establishing logistics centres in the related regions. The company expects to win 300 million new customers and to achieve a growth in turnover of 15-20 percent. (VG p7)

Plaza constructions in bulk manufacture
Plaza Centers counts on Hungarian construction industrial companies in the future as well, for example PannonTeam that builds Veszprém Plaza, which will be finished this year. Heitman Financial Ltd. (seated in the United States, dealin with real estate investments) acquired 90 percent of Plaza Centers. Zvi Bochman gemneral manager said: beside constructing new shopping centres they plan the expansion of Duna Plaza as well. Beside developing Hajógyári-sziget („Dockyard Island”) the luxury hotel planed in the building of the sometimes ballet institution remains to be an own investment of the parent company seated in Israel. (MH p9)

TRADE, FAIRS - 04.02.2004 Do-it-yourself store chains expands
After last year’s constructions the growth of do-it-yourself store chains continues this year as well. Praktiker plans 1500-1500 square metre expansion in Pécs and Miskolc, Baumax and OBI will open two new stores respectively. Until 2006 Praktiker will establish three new units, Bricostore 5 new stores in the next three years; OBI’s network will expand to 25 members in five years and that of Baumax to 20 members by the end of 2006. (VG p11)

Own brands in expansion
Own-branded goods of companies are a significant competition for well-known brands, supported by a serious marketing campaign. Own-branded goods are usually manufactured by national enterprises of small and medium size, however, there are products coming from multinationals, too. SCA, the producer of Libresse and Libero, for example, is manufacturing diapers of drogerie markt, whilst Mizo is manufacturing milk for Tesco and information has it that Szobi and Rauch also have products of this kind. Players of the processing industry servicing the retail trade sector, as a rule, do not speak about this activity, with companies playing a leading role in the given segment and manufacturing marketleading products the least likely to reveal. Own-branded products account for 40 percent of retail traders all products in Great Britain and Switzerland, whilst the corresponding figure stands at 25 percent in Germany and 14-15 percent in Hungary. Retail chain Lidl, famous for its own-branded goods, is giving different names to its products sold exclusively in its outlets. These goods are appropriately protected, not even form the barcode it can be learnt which company is the manufacturer. According to an announcement of Sara Lee Kávé and Tea, brands on the retail sector do have a future, since they are an important tool in the competition with the manufacturers. Ákos Kozák, Managing Director of market research company GfK Piackutató Intézet is of the opinion that small Hungarian manufacturers can stay in the contention with only quality and traditional brands after Hungary‘s impending European Union accession. (NG, p 1 and 3)

TRADE, FAIRS - 06.02.2004 Mail order companies are increasingly popular
Trust in Hungarian mail order companies increases, in which it plays a role that enterprises working with unfair methods and aggressive marketing work were forced back in the market – states the Association of Hungarian Mail Order Companies. The organisation that was formed in December 1993 consists of 14 enterprises that cover 75 percent of the market. Last year the accumulated turnover of the organisation‘s members was HUF 23.4 billion and in 2002 they could consider revenues of 27.4 billion their own. From non-food type retail revenues last year and the year before they had a share of 1.3 percent in average. There are only two Internet companies among the association‘s members, the reason for which is – according to the organisation too – that on-line purchasing service is immature in Hungary. The Hungarian market is considered a quite hard nut to crack for mail order firms. Among EU countries, calculated in average per capita, only Italians buy products distributed by mail order companies in a value lower than we do. (NG p5, VG p13)

2013.06.01.

11

TRAFFIC, TRANSPORT - 02.02.2004 M5 to be bought from loans
The contract that gives the Hungarian government the opportunity to designate the public institution to buy Alföld Concession Motorway Rt. AKA, the operator of motorway M5, has been finalised. Gyula Gaál, the political state secretary of the Economic Ministry sad that the government’s decision is necessary for the agreement to be signed. Both Economic and Finance Ministries suggest that National Motorway Management (Állami Autópálya Kezelõ (ÁAK) Rt.) buys the motorway company. Plans call for the transaction to be financed through loans from a consortium of commercial banks. Gaál stated that there is another idea, under which M5 could be integrated into the sticker-based system and the motorway extended to Szeged in a way that current owners of AKA Rt. are not necessary to be bought out. The loan-based solution of ÁAK and the latter plans are both novelties. Several weeks ago the government spokesman told that the proceeds form Postabank‘s privatisation would be surely enough for the transaction’s costs and in a similar note, the government would have liked to have 100 percent of AKA Rt. earlier. Gaál went on to say that the Economic Ministry is of the opinion that the best solution financially, politically, and economically would be if the government included M5 into the sticker-based system in co-operation with AKA Rt. and they would join their forces in building the motorway to Szeged. According to earlier information, Deutsche Bank has hinted the opportunity of buying through loans so that Bau Holding could extend M5 till Szeged. However, it would not meet the obligation of the public procurement process, putting the government into an uncomfortable situation. To this end, information had it that Hungarian Development Bank MFB would grant the loan, but in the meantime several other large credit institutions (according to daily Magyar Hírlap OTP and Raiffeisen) have also signalled their intention for participation on the financing process. Daily Népszabadság has learnt that the Prime Minister would have negotiations on the final details of the buyout process today. Magyar Hírlap calculated that AKA shares would cost the government HUF 70 billion. (NG, p 1 and 3, Nszab, p 13, MH, p 11)

British Airways to start a new flight
As of March 28th British Airways will start a new flight from Budapest to Gatwick airport in London. Flights will fly between the two cities daily except for Tuesday and Saturday. As of the summer schedule the British airline will offer tickets for HUF 29 thousand and even delete the condition of staying abroad for at least two days. (NSZ p10)

TRAFFIC, TRANSPORT - 04.02.2004 300,000 SkyEurope passengers starting from Budapest this year
Budget airline SkyEurope has flown more than 16,000 passengers starting from the middle of November till the end of the year from Budapest with an occupancy rate of 75 percent. Besides current destinations of Paris, London, Milan and Zurich, it has decided to introduce six new flights from Budapest to different European destinations from the end of March to October 2004. The company will operate six flights a week to Venice, Amsterdam and Warsaw, four to Rome and three per week to both Dubrovnik and Split, starting from Ferihegy 1. The airport’s capacity is limited, so Budapest Airport (BA) plans to build a light structure so called tent terminal with a large capacity while the old terminal is being modernised, so that the reconstruction can go on while even larger passenger numbers are managed. After posting a sales revenue of EUR 13.1 million last year, SkyEurope is forecasting EUR 60 million for this year, whilst projecting that 300,000 of its 815,000 passengers will start from Hungary. (NG, p 5)

M5 case is not finalised yet
Main owners of M5 motorway operator Alföld Concession Motorway AKA Rt. Bau Holding and Bouygues are asking for a much larger price than expected by the government to sell their stakes in AKA Rt. – economic daily Világgazdaság has learnt. The sum can reach HUF 215-220 billion, together with covering its loans. To this end, the option of government totally buying out AKA Rt, has been turned down, since earlier information had it that purchase price would be around HUF 70 billion plus the HUF 50 billion owned by the operator. There is no opportunity for the government to buy only the stake of Bouygues, since there is an agreement between the two large stakeholders that they can sell their packages only together. Vil¹ggazdas¹g has learnt that now the government is only aiming at acquiring a minority stake in AKA with the inclusion on Hungarian Development Bank MFB. The majority stake would still be held by Bouygues and Bau Holding and the motorway would be constructed further to Szeged by AKA Rt. However, the final version is still waiting to be approved. The motorway company is calling for a solution under which the government would lease M5, thus preventing it from taking out further loans. The government has announced at the weekend that a contract has been signed to include M5 into the sticker-based system as of March 12. (VG, p 1 and 5)

2013.06.01.

12

TRAFFIC, TRANSPORT - 05.02.2004 M5. No money, no sticker
There is still no clear information on the future of motorway M5. The Ministry of Economics and Transportation has decided not to give any information in the case and is firing everyone leaking information to the press. In the meantime, the government, unlike in earlier reports, was just listening to an assessment on the eventual ways of the buyout in its yesterday session, but has not made any decisions. Government spokesman Zoltán J. Gál has confirmed that talks were underway and also that as of March 12, motorway M5 would become part of the network accessible by purchase of a motorway sticker and by the end of 2005 it would reach the south-eastern city of Szeged, 60 km from its current ending. What is still uncertain is how much the buyout would cost. According to economic daily Világgazdaság, the government would have to pay a total of HUF 200-220 billion to buy out motorway operator AKA Rt. This would include the purchase price, the loans of AKA Rt. and costs of the motorway’s extension to the Hungarian border. This information, however, was denied by a source from AKA Rt, whilst economic daily Napi Gazdaság has put the price at HUF 140 billion. Daily Népszabadság has learnt that owners of the concession company would agree to M5 entering the sticker-based system as it was promised by Prime Minister Péter Medgyessy on condition that the government is putting the HUF 70 billion necessary to purchase shares, together with HUF 50 billion to pay back AKA loans in deposit with an international credit institution. The deposit would run till 31 May, the final date for the buyout process, so should the government not ask for the process to be postponed, the money could be going to owners of AKA Rt. There is likelihood that investors would accept government guarantee instead of a deposit, however, they are not satisfied with guarantees of National Motorway Rt or Hungarian Development Bank MFB. The government, for the time being, has not found the sources of this expenditure and its current plans call for the money for the buyout coming form loans. Information has it that sources form AKA Rt. have suggested that instead of a buyout, the government could get a minority stake in the operator through a capital raise in MFB and further on, it would pay a yearly fee in return for the sticker system’s introduction. Also, it would have to find the HUF 90 billion necessary to build the 45 kilometre stretch leading to Szeged, which would be carried out by Strabag, belonging to the interest group of Bau Holding, one of the owners of AKA. Final details of this solution would be worked out by the government till the end of May, however, it would have had to pay AKA already in March a certain type of compensation for the sticker-based system’s start. Should the Economic and Finance Ministries not be able to come up with an acceptable solution for AKA Rt., the buyout would be carried out from the money deposited. At the same time, AKA still has its earlier suggestion, under which the government would introduce the sticker through buying a service. Although this would mean HUF 17 billion this year and in the next one and HUF 25 billion after that, but in this case investors would ask state guarantee only to the tune of the annual rental fee for the introduction of the sticker. The lease would cost HUF 70 billion in the first two years and would go up by HUF 100 billion once the motorway is built further. (Nszab, p 13, NG; p 1 and 3, MH, p 1 and 3, NSZ, p 1 and 5, Vg, p 5)

Foreigners going out of the motorway bidding
According to information by daily Népszabadság, no single foreign firm bidding for Hungarian motorway stretches have made it to the next round. The bidding process included nine stretches and totalled HUF 200 billion. All this means that in the second round, only Hungarian companies may bid. Although National Motorway Rt. (Nemzeti Autópálya Rt.) has included foreign companies in the December round, unlike in earlier bidding processes, to break down the dominance of Hungarian constructors and build motorways cheaper, this time foreign applicant have been termed as not qualified enough, leading to motorway being built for 20-30 percent more, translating into HUF 40-60 billion in extra costs. (Nszab, p 13)

Malév is on time
Concerning the exact times of arriving flights Malév is the seventh, however respecting lost packages per thousand air passengers is the fifth on the list, which has been made by the Association of European Airways (AEA) based on data of 30 European Airway companies. According to AEA’s study the fewest packages (3.9) get lost on the flights of Turkish Airlines, while the most (22.6) disappear on KLM’s. At the Hungarian Airlines 7.3 suitcases get lost per thousand air passengers. (MH, p11)

2013.06.01.

13

TRAFFIC, TRANSPORT - 06.02.2004 Minority ownership is the worst solution
It is possible that motorway M5 will not be included into the sticker-based system as it was promised by the government by 12 March. However, the government’s other promise, under which the stretch between Kiskunfélegyháza and Szeged is to be constructed by the end of 2005, can be met, construction experts say. The deadline of 31 December, 2005 can be met on the back of favourable geographical conditions even in a way that construction works would start only next spring. It is not known for the time being who and how will buy the motorway and nor do we know how are discussions going on between the government and motorway operator Alföld Concession Motorway Rt (Alföld Koncessziós Autópálya (AKA) Rt.). Experts are of the opinion that one of the recent plans, which would see the Hungarian state buying out the 41 percent ownership stake of French Bouygues and through this is getting a minority ownership in AKA Rt. is the worst possible scenario. In this case, the state would have no important role to play, whilst Strabag, the construction company belonging to other main owner Bau Holding would build the motorway further. On top of that, the state would enter a loss-making company, since the balance sheet of AKA was positive only because it was guaranteed a 7 percent profit through state subsidies. (NG, p 1 and 3)

INVESTMENT, DEVELOPMENT - 02.02.2004 Rockwool to start an investment of several billion
The world’s largest rockwool producer, Rockwool International acquired an additional Hungarian interest in addition to its plant in Gógánfa. The Danish company bought the insulating material factory in Tapolca from the Spanish Poliglas. In the future the factory will be operated by its subsidiary, Rockwool Hungary Kft. Rockwool prepares for capacity increasing and technological and technical development in both of its plants in the total value of HUF 3.5 billion. This amount also includes the costs of the logistics centre, from where the firm will supply to the whole region. The Danish company justified the factory acquisition and the development with expanding Central Eastern European markets. (NG p1, 5)

INVESTMENT, DEVELOPMENT, REAL ESTATE - 02.02.2004 Plazas in Hungary changing hands
America-headquartered real estate investment company Heitman Financial Ltd. has founded a mixed enterprise with Israel-based Elbit Medical Imaging Ltd. In an investment of USD 673 million, that is, above HUF 143 billion, and at the same time it takes a 90 percent ownership stake in the company, the owner of 18 Plaza Centers built in Central Europe (14 of them in Hungary). The new firm is to buy 90 percent of Elbit’s 9 shopping centre now being built, too. Heitman, to enter the deal through Plaza Centers, the operator of centres, is going to pay USD 153 million in cash and pays the debt of shopping centres form the remaining sum. Elbit, at the same time, keeps hold of the ownership rights of certain real estates and investments, among them one planned for the Hajógyári island. The latter investment would see the construction of a hotel and entertainment centre. To realise this, Plaza Centers have founded a mixed enterprise with Hungarian Foreign Trade Bank MKB last October. (VG, p 1 and 8)

INVESTMENT, DEVELOPMENT, REAL ESTATE - 03.02.2004 Raiffeisen getting Rózsakert
Rózsakert Bevásárlóközpont Kft., owned by Whitehawk Enterprise Ltd., has sold the shopping centre of the same name to Raiffeisen Real Estate Fund (Raiffeisen Ingatlan Alap) for the price of HUF 4.5 billion. The establishment of the second district of the Hungarian capital is set to bring a double-digit yield to Raiffeisen, such as the other large shopping centre of the fund, Szinva Park. Rózsakert differs from other peers in Budapest, since those living nearby are buying things for their everyday needs and what gives it an added speciality is that there are several health care service providers in the establishment. Rózakert has already been through the crisis that has shaken it after the opening and those eager to lease in it have emerged and renting fees have gone up recently. Having bought Rózsakert, Raiffeisen Ingatlan Alap will have an average share of real estates from 57 percent in December to above the goal of 80 percent with another real estate purchase set to take place within 2-3 weeks. (NG, p 4)

Harbor Park awarded
Harbor Park has been awarded the Central and Eastern European Real Estate Quality Prize. The prize has been awarded in 16 different categories to real estate developments of 10 countries. The Harbor Park investment saw the construction of 180,000 square meters of warehouse and office buildings in an investment of HUF 14 billion. (VG, p 19)

2013.06.01.

14

INVESTMENT, DEVELOPMENT - 05.02.2004 ZF Hungária to develop its Eger plant
Car gearbox parts producer ZF Hungária Kft, a subsidiary of German car parts manufacturer ZF Friedrichshafen AG, will invest EUR 74 million over three years, starting in the second quarter of the year. ZF’s Hungarian General Manager Ulrich Diller said that under the project, the company plans to double production of gearboxes by 2008, which currently stands at 60,000 units per year. The company will use the funds for construction of a 15,000 square meter facility at its plant in Eger. ZF Hungária plans also to increase the number of the produced steering gears to 1.2 million per year by 2008, up from the current 100,000. The company will start manufacturing servo pumps next year and plans an output of 600,000 for the first year, increasing to 1.7 million by 2008. In parallel, ZF will increase its staff to 1,400 from the current 600. ZF Hungária targets a revenue of EUR 400 million, up from EUR 100 million posted for 2003. (NG, p 4)

Euro-Vegas can be built
The building licence will expectedly be issued in the first half of the year for the Euro-Vegas complex to be constructed in the neighbourhood of Hegyeshalom and Bezenye. Up to now the Austrian, American and Hungarian investors have spent HUF 700 million on the casino and hotel complex in Western Hungary. The large scale investment of a value of nearly one billion dollars can start next year according to plans. One of the investors is the Austrian Hans Assamer but the Hungarian and American partners are unknown. Hungarian subcontractors will also be involved in the implementation. On the 350-hectarre large area three hotels for 3 thousand people respectively, a casino, golf course, concert and event halls, guest houses, servicing plants and shops will be built. According to calculations, the facility will accommocate ten thousand guests concurrently and employ 3500 persons. In the second phase thermal baths, theme parks and logistics centres can also be established in the area. (VG p1, 10)

Kõolajvezetéképítõ getting an order from Iraq
Kõolajvezetéképítõ (KVV) Rt., dealing with constructing crude oil pipelines, is likely to return to Iraq after 15 years. Although the contract has not been signed yet, it seems that the Siófok-based company will get a job in South Iraq, in the area under British management. The amount of the job is not that significant for the company, but what is really worth mentioning is that they will be present there together with Rotary Rt. These companies have earlier worked in Kuwait at the time when Iraq had occupied the country. KKV had been hardly hit by the developments, since its machinery was lost and has not been given any compensation ever since. According to preliminary figures, the company posted sales revenue to the tune of HUF 3.7 billion last year, up on HUF 1.2 billion recorded a year earlier. This year’s plans call for above HUF 4 billion in sale revenues and profits are set to significantly exceed HUF 10.5 million coming for two years ago. (NG, p 6)

INVESTMENT, DEVELOPMENT, REAL ESTATE - 05.02.2004 Market cleaning in the apartment sector
In January apartment prices increased by 5-8 percent in average. However, certain investors did not raise in order to maintain demand. In case of builders the current 10 percent pre-tax result will decrease from now on, and in addition to this, the collateral reserve decreased to 1-2 percent. Investors expect an interest cut in half-a-year. According to observers the expected narrowing of demand will bring market cleaning. (VG p19)

INVESTMENT, DEVELOPMENT - 06.02.2004 Rover to build a motorway in Slovakia
British car manufacturer MG Rover would consider establishing a plant is Slovakian Kosice if the motorway connecting it to Hungarian Miskolc is already in place. To this end, the local selfgovernment is doing its best for the motorway to be constructed. Experts of the car manufacturing company, planning to invest EUR 200 million to the Central European region, are conducting preliminary talks with Slovakian officials on an eventual investment (Vg, p 14)

Giant housing project in Transdanubia
SCD Group Real Estate Development and Investment Rt. (SCD Group Ingatlanfejlesztési és Befektetési Rt.), boasting sales revenues to the tune of HUF 6-8 billion annually, is going to build 300 flats in the centre of Veszprém in an investment of HUF 3.5 billion. Flats will range from 29 to 75 square meters in size, with majority of them being 1 or 1.5-roomed. The company is of the opinion that demand will be quite large for small flats, since university students have problems with finding accommodation in the county seat. The real estate development project is to start this spring and plans call for the finalisation of that by the end of 2005. (VG, p 1 and 16)

2013.06.01.

15

TAX, SOCIAL INSURANCE - 03.02.2004 APEH focusing on discounts
Hungarian Tax Office APEH is taking a special look at the legality of discounts made use of on purchasing computer equipment bought under the Sulinet program and also on home-related tax deductions. When it comes to merchants, mainly companies distributing textile products and shoes can expect stepped-up checking activity, whilst in the transportation sector freight forwarders will be specially looked at. During subsequent revision, special attention should be paid for those enterprises that were given a large bill from a taxpayer of simplified entrepreneurial tax. Form those choosing this simplified tax, the tax office will double check whether they meet their obligation to give a receipt. (NSZ, p 1 and 5)

WORLD ECONOMY - 06.02.2004 Budapest neck-to-neck with Milan
Melbourne is the metropolis with one of the largest quality of life, together with Canadian Vancouver and Austrian Vienna – the annual survey of Economist Intelligence Unit reveals. The list contains 130 cities from all around the world and Budapest has been ranked as 55th, together with Italian Milan and Korean Seoul. The Hungarian capital, together with its Czech counterpart Prague, have both been better ranked that the lagger of current European Union member states Athens, occupying 64th position. Economist Intelligence Unit is of the opinion that Budapest is the town where foreigners living could count on the lowest number of hardships among Central European cities. (Nszab, p 5)

MEDIA - 03.02.2004 Newcomers in the advertisement pie this year
According to certain estimations a growth of 1-2 percent can take place in the advertisement pie this year. The accession to the European Union can play a role in this expansion, due to the adherence new brands can appear in the market. Experts say first of all the advertising budget of daily consumables will rise, while stagnation is expected concerning amounts spent on car advertisements. Based on data of media-diagnosis Unilever Magyarország Kft. spent the most significant amount on advertising just like in the past years, the amount added aup to 16.6 billion forints. On the second place there is Procter&Gamble, the company spent HUF 10 billions, followed by Pannon GSM that paid HUF 9 billion for publicity. The next players are L'Oréal and Westel with expenditures of 8.6 and 7.6 billion forints. Beckiser achieved the sixth place in the ranking with its spending of 7.4 billion forints, followed by Vodafone who paid HUF 7.3 billion away, then comes Henkel with 5.7, Brau Hungária 5.64 and Nestlé with 5.61 billion expended on advertisements – turns out from the advertisement supplement of Napi Gazdaság (Daily Economy journal). The inset also writes about web designers focus on small size enterprises, furthermore about festivals those will take place abroad on the occasion of Hungary’s accession to the European Union. (NG p6)